The force of this shift in consumer purchasing behaviors was highlighted this past March when the consumer electronics retailer Best Buy Co. recorded a loss of $1.2 billion during fiscal 2012, ended March 3. The huge loss was tied to the comfort consumers are feeling in buying products on-line. There was a time when specialty stores such as Best Buy, Circuit City and others were the primary hubs for the purchase of consumer electronics. Product selection and service were the hallmarks of their business models.
Today, more and more consumers are likely to order consumer electronics on-line directly from a manufacturer or an on-line retailer such as Amazon. The barriers that once limited on-line shopping — fear of being defrauded or the time it takes for a product to be delivered — have shrunk as consumers become increasingly comfortable with web-based technology and the purchasing process.
These shopping behaviors extend beyond consumer electronics into other retail formats, including the largest retailers like Target Corp. and Wal-Mart Stores, Inc. During the CIBC Retail and Consumer Conference, held this past March, Duncan Mac Naughton, executive vice-president and chief merchandising and marketing officer for Wal-Mart, outlined the changes the retailer is making, particularly in food, to maintain foot traffic and repeat visits to Wal-Mart stores in competition with other retailers as well as the Internet. Two areas of focus are improving fresh meat and fresh produce selection.
“This year, we are really focused on engaging with our customer and converting them into our meat department,” he said. “So as they come in the store, we can become a destination for meat products inside of Wal-Mart.
“The second area is produce, about making sure our product quality spec is right, and then really focusing on the flow of produce, as how can we make sure that we have the freshest product on the shelf and ensure that we have more freshness at home for our customer?”
For Mr. Mac Naughton, the reason for making the investments in strengthening Wal-Mart’s fresh meat and fresh produce offerings is simple: “… It drives traffic, it drives interest and it drives great relevance with our customer,” he said.
Food’s importance at retail isn’t limited to supercenters, either. Over the last five years, the grocery industry has added approximately 150 million square feet of new capacity, according to the Food Marketing Institute, a retail trade association. None of the new space was built by traditional supermarket retailers; rather, it was added by supercenters, dollar stores, drugstores, and other smaller formats like fresh specialists and hard discounters.
As food’s strength at retail continues to grow, it will challenge food and beverage manufacturers to be more creative in the types of products and packaging formats offered. It also will allow manufacturers to reach out to better segment and target demographics that may be shopping for value at supercenters or dollar formats, as well as those consumers looking for a quick meal from a convenience store.
Forward-thinking food companies also may want to consider the impact the Internet will have on their business. The Food Marketing Institute sees on-line shopping “eating away at the center of the store.” These purchases are mainly focused on non-food items, but the day when a rising number of consumers order shelf-stable food and beverage products on-line may not be far off.
It also may be why a leader like Wal-Mart is putting such an emphasis on freshness.